Treasury Laws Amendment (Putting Consumers First - Establishment of the Australian Financial Complaints Authority) Bill 2017
Friday 15 September 2017 @ 11.17 a.m. | Corporate & Regulatory | Trade & Commerce
Yesterday, 14 September 2017, Senator the Hon James McGrath Introduced the Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Bill 2017 (‘the Bill’). Currently before the Senate, the Bill’s purpose is to overhaul the dispute resolution framework of the financial system by establishing a new, not-for profit dispute resolution body, the Australian Financial Complaints Authority (‘AFCA’), thus allowing consumers and small businesses to obtain access to “free, fast and binding dispute resolution”.
The Ramsay Review
The Bill is the result of an independent review of the dispute resolution framework, commissioned in April 2016 by the Australian Government, known as the 'Ramsay Review'. The Ramsay Review, after an extensive consultation process, found that ”the current dispute resolution framework is a product of history rather than design and, in significant areas, reform is needed.”
As such, the Ramsay Review proposed eleven recommendations, with the central recommendation being the establishment of a “new one-stop-shop dispute resolution body for all financial disputes, including superannuation disputes.”
The Bill and the creation of the AFCA will also address issues raised by the House of Representatives Standing Committee on Economics’ Review of the four major banks (‘Coleman Report’) and the Carnell Inquiry into small business loans.
Australia’s Commitment to Financial Accountability
In his second reading speech, Senator McGrath stated:
“The bill forms part of the Government’s broader commitment to ensuring that the banks and other financial institutions are held to account when they fail to meet community expectations.
The financial sector plays a vital role in the Australian economy by meeting the needs of its users, including consumers and small businesses. Its role in the economy and the lives of all Australians continues to grow and evolve. Given the crucial role of the financial sector, Australians expect high standards from financial institutions.
Where these expectations are not met and consumers wrongfully suffer a loss, it is critical that those who have been wronged have access to redress in a timely manner.
External dispute resolution (EDR) plays a critical role in providing consumers and small businesses with access to an alternative, out-of-court, dispute resolution service, to hear and determine their complaints about financial firms.
The Government is committed to having a world class financial dispute resolution system.”
The AFCA Legislative Framework
The Bill sets out the new legislative framework outlining the standards that the AFCA must adhere to. Schedule 1 establishes the External dispute resolution system, whereby the Corporations Act 2001 (Cth) ("the Corporations Act") and a number of other relating Acts are amended, to allow for the creation, regulation, authorisation and membership of the AFCA.
Of particular significance in this Part is Schedule 1, Part 1, Section 2, which inserts Part 7.10A into the Corporations Act. This amendment is important as it gives the Minister the power to create an external dispute resolution body so long as particular mandatory requirements (Corporations Act, s 1051) are met. These requirements are:
- s 1051(2): Organisational Requirements;
- s 1051(3): Operator Requirements; and
- s 1051(4): Operational Requirements.
Other important considerations that the Bill requires for the creation of an external dispute resolution body are, as per the proposed insertion of s 1051A of the Corporations Act:
- the accessibility of the scheme;
- the independence of the scheme;
- the fairness of the scheme;
- the accountability of the scheme;
- the efficiency of the scheme;
- the effectiveness of the scheme.
As summarised in the second reading speech:
“The legislation will ensure that AFCA will provide fair, efficient, timely and independent dispute resolution services and that it has the relevant expertise to resolve the disputes it hears.
The legislation also includes a number of statutory provisions to ensure that AFCA has the necessary powers to effectively resolve superannuation disputes. Additional statutory provisions are required because of the complex nature of some superannuation disputes that involve third parties, such as death benefit disputes.
AFCA will have the power to join third parties to a dispute, require parties to attend conciliation and require the production of documents.
The statutory provisions available to AFCA will allow timely decisions to be made, to enable prompt payment of death benefit amounts by superannuation funds, to those who may be in need.
The framework does not dictate the way in which AFCA should deal with complaints. This will enable AFCA to adapt to change and to be flexible and innovative in its approach to resolving disputes.
To ensure that AFCA meets community expectations for free, fast and binding dispute resolution, it will be subject to a comprehensive accountability regime. […]
The enhanced accountability that AFCA will be subject to under the new regime represents a significant improvement over the existing regime, under which ASIC had limited powers to require dispute resolution bodies to improve their practices. The bill also introduces a new internal dispute resolution reporting regime.”
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Sources:
Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017 (Cth), Explanatory Memorandum and Second Reading Speeches available from TimeBase's LawOne service
